Managerial Accounting: Creating Value in a Dynamic Business Environment
12th Edition
ISBN: 9781260417074
Author: HILTON, Ronald
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter II, Problem 7E
1.
To determine
Calculate the future value of investments invest in six years.
2.
To determine
Calculate the present value of friend’s future gift.
3.
To determine
Calculate the how much money required to invest each year in an account at a rate of 6% per year to accumulate $52,500 (property price).
4.
To determine
Calculate the how much money required in account in order to withdraw some amount each year (at 10% per year).
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Answer each of the following independent questions. Ignore personal income taxes. Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Suppose you invest $4,100 in an account bearing interest at the rate of 10 percent per year. What will be the future value of your investment in five years? 2. Your best friend won the state lottery and has offered to give you $11,600 in four years, after he has made his first million dollars. You figure that if you had the money today, you could invest it at 8 percent annual interest. What is the present value of your friend’s future gift? 3. In four years, you would like to buy a small cabin in the mountains. You estimate that the property will cost you $68,500 when you are ready to buy. How much money would you need to invest each year in an account bearing interest at the rate of 4 percent per year in order to accumulate the $68,500 purchase price? 4. You have estimated that your educational expenses…
Suppose that you are obtaining a personal
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let your money grow for 9.5 years at 8 percent, how much will you have? c. How long will it take your money to grow to $33, 000 if you move it into an account that pays 3
percent compounded annually? How long will it take your money to grow to $33, 000 if you move it into an account that pays 12 percent? d. What does all this tell you
about the relationship among interest rates, time, and future sums?
Chapter II Solutions
Managerial Accounting: Creating Value in a Dynamic Business Environment
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